Investing in boarding house?

[Handie Kunen]

I have recently come across this opportunity of an 11 unit property which was converted from a hotel. Some of the units are rooms with shared amenities, so essentially it’s like a boarding house. The area is decent but I am still concerned about the type of tenants it attracts. I was told that the tenant base may not be as “transient” as people usually think. As a matter of fact, there can be long term leases with elderly tenants. The numbers look great on paper. Can anybody share their experience investing in such type of properties?

[Greg L.]

I own a small rooming house of 9 rooms and am just finishing up my second year of operations.  I also own apartments, so I'm in a good position to compare the two.   A small rooming house will require only slightly more work than operating apartments.  I spend anywhere between 1 to 4 hours a week dealing with various things at the rooming house.  A much larger rooming house (i.e. 20 rooms plus) will definitely require more work.  My tenants are either working people or older folks on a fixed income.   Both groups have been priced out of the apartment market so they aren't as transient.  I think the economic situation has created a  new market for rooming houses that aren't the criminal or drug addict types.  I don't deal with the latter because I don't have to.  I've had a mix of men, women, parents and children, and couples--in other words, normal people.  It's important to have a good set of house rules and be prepared to enforce them.  I do get some short term stays (i.e. less than three months) but my average stay is 6 months or so with about half of the residents being there over a year.  One of the longer term residents recently "graduated" to one of my apartment units.